January 10, 2018—A Providence woman, Ms. Souleang Kane, 48, received a prison sentence in the United States District Court in Boston in connection with a long-running, off-the-books payroll scheme by which various temporary employment agencies she owned in Massachusetts evaded workers’ compensation insurance premiums and federal and state employment taxes.
In October 2018, Ms. Kane pleaded guilty to eighteen counts of willful failure to collect and pay over taxes to the Internal Revenue Service (IRS) and five counts of mail fraud involving workers’ compensation insurance.
U.S. District Court Senior Judge Douglas P. Woodlock sentenced Ms. Kane to serve two years in prison, followed by three years of supervised release. Judge Woodlock also ordered Ms. Kane to pay restitution to the three workers’ compensation carriers she had defrauded.
Fraudulent payroll numbers given to workers’ compensation carriers and IRS
From 2010 to 2015, Ms. Kane operated a series of temporary employment agencies under the names Expert Staffing, Affordable Staffing and M&K Temp Inc., providing labor for Massachusetts companies in agricultural industries.
By Ms. Kane grossly understating her business’ payrolls to her workers’ compensation insurers, The Travelers, The Hartford, and AIM Mutual, and their auditors, she fraudulently reduced her companies’ workers’ compensation insurance premiums by $165,233.36 between 2010 and 2015.
During the same period, Ms. Kane failed to report to the IRS approximately $4.3 million that her agencies paid in employee wages. Although she withheld federal taxes from the wages of her employees, Ms. Kane failed to report the wages to the IRS. Ms. Kane thereby avoided collecting and paying to the IRS both the taxes required to be withheld from employee wages and the matching employer taxes she was required to pay. As a result, Ms. Kane evaded payment of more than $1.3 million in federal taxes. She also evaded more than $431,000 in Massachusetts state taxes.
Ms. Kane’s request for probation or for one year and a day of prison time
Before Ms. Kane’s January 10 sentencing hearing, both Ms. Kane’s counsel on her behalf and the Assistant United States Attorneys prosecuting Ms. Kane submitted sentencing memorandums to the presiding justice arguing their respective positions as to the appropriate punishment under the federal sentencing guidelines.
Ms. Kane, through her counsel, asked the Court to impose a sentence of probation on her guilty pleas. Or, in the alternative, if the judge did not believe probation an appropriate sentence, to impose a prison sentence not to exceed one year and one day with her serving her sentence in a federal prison facility as close to Massachusetts as possible.
In support of Ms. Kane’s sentencing request, her counsel’s memorandum argued:
- Ms. Kane was forty-eight years old and was born in Cambodia.
- She was one of three children born to her parents during the time the Cambodian Civil War was occurring.
- Her mother died at the age of twenty-four due to the war.
- Her father remarried and her stepmother both neglected her by withholding food and physically abused her by beating her with wires.
- While still a child, she witnessed the execution of her aunt and various others at the behest of the Khmer Rouge regime and its leader Pol Pot.
- At the age of ten, she and her family were able to escape the killing fields of Cambodia for Thailand eventually arriving in the United States at the age of 12.
- In the United States, Ms. Kane became a Naturalized U.S. Citizen.
- Though being separated from her husband for seventeen years, this relationship produced four children; Three of these children are graduates of college and the fourth is currently attending a School of Pharmacy.
- Ms. Kane, through another relationship, is the mother of her ten-year old son who is a student and lives with Ms. Kane.
- Ms. Kane’s entire world revolves around her ten-year old son and the thought of losing her son is beyond terrifying to Ms. Kane.
- With neither financial assistance nor parental support from either gentleman and Ms. Kane is the sole emotional and financial support to her children.
- As confirmed in the Court’s s presentence report, Ms. Kane suffers from depression, which she is prescribed medication for.
- She has planned her suicide on two occasions and attempted suicide by overdosing on sleeping pills.
- Since the onset of her dealings with this criminal matter, Kane is experiencing suicidal ideation once again.
- Additionally, her alcohol consumption has increase significantly since her involvement in the criminal justice system.
- She accepted responsibility for her criminal actions and assisted the government.
Ms. Kane’s sentencing memorandum finally argued that her experiencing such violence as a child and the emotional and physical abuse at the hands of her stepmother had a profound effect on her. But, the memorandum acknowledged that, “In no way did these events cause the unlawful conduct by Ms. Kane. Rather, these horrific events should be considered in fashioning an appropriate sentence.”
Prosecution seeks 33-month prison term emphasizing amount and sophistication of the fraud
In its sentencing memorandum, the government acknowledged Ms. Kane’s difficult and traumatic childhood resulting from the loss of her young mother from the war and her subsequent abuse by her stepmother before escaping from the killing fields of the Khmer Rouge’s Cambodia.
The government then pointed out that Ms. Kane, however, was a fortunate survivor of the war in Cambodia who had been given refuge in the United States from the age of twelve and who had been granted naturalized U.S. citizenship. She received her high school education in Providence, Rhode Island and had taken the opportunity to obtain a community college Associate’s Degree in Warwick, RI.
The government’s position was Ms. Kane did not “honor the nation, public services and business practices that provided her such protections and benefits”, but instead “defrauded this nation and its citizens of nearly $2 million. Along the way, she also defrauded numerous employees, most of them immigrants themselves, by pocketing a significant portion of their wages she had withheld for purported payments to the IRS on their behalf.”
The government countered Ms. Kane’s counsel’s request for probation or, in the alternative, a prison sentence not to exceed a one year and a day, with its own recommendation for the sentencing judge to impose a prison sentence on Ms. Kane of 33 months. Additionally, the government asked for a term of supervised release for 36 months following Ms. Kane serving her sentence along with an order of restitution for $165,233.36 payable to the insurance company victims of her workers’ compensation scheme, and further restitution as a condition of supervised release in the amount of $1,381,790.37 to the IRS and $431,414.00 to the Massachusetts Department of Revenue.
The government based its request for this stiffer sentence for Ms. Kane on:
- the manner and means of her related schemes to defraud the IRS and the workers’ compensation insurance system (both schemes involving significant losses to the victims and commensurate gains to her personally);
- the duration of her schemes (operating from at least 2007 to 2015):
- her intentional failure to pay over to the IRS the taxes she had withheld from employees (leaving those employees potentially liable for unpaid taxes);
- her intentional failure to pay over her own employer’s share of taxes; and,
- her use of family members to accomplish her schemes (thereby exposing family members to potential criminal liability).
The government ended its sentencing memorandum with the statement:
Even considering her asserted bases for downward departure, [Ms.] Kane deserves the sentence recommended here. Hers were a massive tax fraud extending over many years, and a simultaneous workers’ compensation fraud with its separate components. [Ms. Kane] successfully concealed about $6 million in wages and caused the U.S. Treasury over $1.3 million in losses. The scheme required thousands of deceptive acts, some petty, like structuring repeated bank withdrawals, and some significant, like swearing to false tax returns, deceiving her own accountants in the preparation of tax returns, and defrauding workers compensation auditors. Ms. Kane initiated, managed and personally gained from all of it.”
Judge increases severity level of Ms. Kane’s crimes but deviates downward from federal sentencing guidelines
At the sentencing hearing, according to the docket entry, the sentencing judge reviewed the federal sentencing guidelines and decided to increase the severity level of Ms. Kane’s crimes by two levels based on the guideline’s provision for when “the offense otherwise involved sophisticated means and the defendant intentionally engaged in or caused the conduct constituting sophisticated means…” Such a higher level would usually mean Ms. Kane’s period of incarceration would increase.
The Court then conducted a discussion of the statutory provisions regarding restitution as part of the sentence and apparently concluded that the only restitution allowable would be for the monies the insurance company victims were defrauded of as part of the scheme. However, the lack of restitution would not affect the IRS’ ability to recover Ms. Kane’s tax liabilities through the use of its statutory powers to levy on any property she might have.
After hearing from both Ms. Kane’s counsel and the government’s counsel regarding their respective recommendations to the Court for sentencing, Ms. Kane addressed the Court regarding her sentence.
The judge apparently took into account the circumstances of her life and the nature of her crimes by deviating downward from the sentencing guidelines and the recommendation of the government in imposing a 24-month sentence with no fine but with a restitution order of $165,233.36 for the workers’ compensation premium fraud.
Members of the prosecution team involved in Ms. Kane’s case
United States Attorney Andrew E. Lelling; Joel P. Garland, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston; and Anthony DiPaolo, Chief of Investigations of the Massachusetts Insurance Fraud Bureau, made the announcement. Assistant U.S. Attorney Victor A. Wild of Lelling’s Economic Crimes Unit prosecuted the case.
For more details
Agency Checklists has previously published an article on Ms. Kane’s guilty plea. That article details Ms. Kane’s scheme. See Agency Checklists’ article of October 17, 2017, “Temp. Employment Agency Owner Pleads Guilty To Insurance Fraud And Tax Evasion.”